Is Alibaba-The stock (NYSE: SBN) a buy now or not? Spirits may still disagree on this. In any case, the chance-risk ratio reflects a whole lot that can be used to fundamentally justify your decision.
But let’s take another look at the possibility today. In addition to the risk-reward ratio and the business-oriented approach, we can identify some hard facts. Let’s just do it, here are three such things about Alibaba shares.
Alibaba stock: P / E!
Admittedly, there is a lot of rumbling about Alibaba shares, the financial year 2022 was partly marked by fines and other negative effects on earnings. As a result, earnings per. stock only $ 3.58, which would translate to a price-to-earnings (P / E) ratio of 30.7 to the current stock price of $ 109.90. Even that does not necessarily look expensive for a growth stock.
But in the more normal financial year 2021, earnings per. share already $ 8.20. Based on this value, the P / E would be only 13.2. This would clearly put the stock in value range.
Finally, let us not forget that the Alibaba share has further growth potential. E-commerce, the cloud and other tech solutions are clear growth markets for the Chinese tech group. Whether the government looks critically at the group or imposes restrictions.
The Chinese market
A tough factor is also the Chinese market, where the Alibaba share is operationally at home. In the medium to long term, it’s about spanning the globe with your own solutions. But much of the success remains dependent on the core market.
China is not all downsides, though that is what investors like to focus on at the moment. But it is also a very adaptive market when it comes to technological solutions and digital services. More than a billion consumers is also a large potential market, with Alibaba already a leading technology group. This should be acknowledged positively.
Nevertheless, the Alibaba share is also at the mercy of policy and possible market interventions. China is therefore a great opportunity on the one hand, but also a risk. For me, however, it would be important to buy this stock, if at all, because I see a great opportunity that still exists in the core market.
The market value of the Alibaba stock compared to peers
Finally, let’s look at the market value of Alibaba shares in a peer comparison. Due to the favorable valuation, the value is still quite low at USD 294 billion. For a locally dominant technology group, this rating is really very low.
Amazon, which I see as similarly dominant in the Western world, comes, for example, at $ 1.18 trillion, which is roughly four times that number. Of course, there are differences in quality, distribution and business model. Nevertheless, one may ask oneself: Is it reasonable in the long run?
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Vincent owns shares in Alibaba. The Motley Fool does not own any of the listed shares.